babc.com ALABAMA I DISTRICT OF COLUMBIA I MISSISSIPPI I NORTH CAROLINA I TENNESSEE Overview of Industrial Development Board TIFs The City of Spring Hill Tennessee August 31, 2015 Presented By: J. Thomas Trent, Jr.

© 2009 Bradley Arant Boult Cummings LLP IDB – Projects  “Projects” include, among other things: Manufacturing, assembling, warehousing and distribution Commercial enterprises, including retail and financial services Office buildings Offices or public buildings for any city or county, board of public utilities, or any public instrumentality of the state or U.S. Public parks, certain recreational facilities, theme or amusement parks Low or moderate income, elderly or handicapped multifamily housing Public infrastructure, public improvements and public facilities Hotels and motels (with restrictions)

© 2009 Bradley Arant Boult Cummings LLP General Board Powers  Acquire Projects ( by purchase, exchange, gift lease or otherwise )  Improve, maintain, equip and furnish Projects  Lease Projects, collect rent and apply to indebtedness of the Corporation  Sell Projects  Enter into loan agreements relating to Projects  Sell, exchange, convey or donate any or all of its properties

© 2009 Bradley Arant Boult Cummings LLP General Board Powers (cont’d)  Issue bonds or otherwise borrow money  Mortgage or pledge any or all of its Projects as security for payment of any bonds or notes  Pledge revenues and receipts from Projects  Employ and pay compensation to employees and agents  Conduct all powers expressly given under the Board’s Charter

© 2009 Bradley Arant Boult Cummings LLP Special Provisions  Cannot pledge the general taxing power of the municipality without certificate of public purpose and necessity and 75% approval in a referendum  Cannot operate Projects  All Board meetings must comply with open meetings and open record laws

© 2009 Bradley Arant Boult Cummings LLP Tax Increment Financing “TIFs”

© 2009 Bradley Arant Boult Cummings LLP TIF Financing Overview  Project Financing  Repaid from incremental increase in property tax – non-recourse to the IDB, the City and the County  Concept is that “Increment” is new money and does not reduce the current tax collected

© 2009 Bradley Arant Boult Cummings LLP IDB TIFs – Economic Impact Plans An Industrial Development Board (“Board”) is authorized, through the adoption of an economic impact plan (“Plan”), to designate an area (“Economic Impact Area”) with respect to which the Board is entitled to receive the incremental property tax.

© 2009 Bradley Arant Boult Cummings LLP IDB TIFs – Economic Impact Plans  Allocation of Property Taxes – Allocation of Base Taxes - The amount of taxes payable with respect to the property in the Economic Impact Area for the year preceding the adoption of the Plan ("Base Taxes") is allocated to the city and county levying the property tax. – Allocation of Excess Amount - The excess of the property taxes imposed over the Base Taxes and the Dedicated Taxes is allocated to the Board. The Plan may allocate an amount greater than the Base Taxes and Dedicated Taxes to the city and county.

© 2009 Bradley Arant Boult Cummings LLP IDB TIFs – Economic Impact Plans  Use of Taxes by the Board – Incremental taxes are typically used to pay debt service on bonds issued by the Board to pay cost of the projects. – The Board is authorized to pledge the taxes to secure payment of the bonds. – Costs are limited to Public Infrastructure costs unless Comptroller and Commissioner of Economic and Community Development approve.

© 2009 Bradley Arant Boult Cummings LLP TIF Example  Predevelopment Assessment = $1,000,000  Post-Development Assessment = $10,000,000  Tax Rate = $4.50/$100 of Assessed Value  Base Taxes Paid to Taxing Authority: – = $1,000,000 Predevelopment Assessment x 40% /$100 X Tax Rate = $18,000  Tax Increment: – $10,000,000 Post-Development Assessment x 40% /$100 x Tax Rate = $180,000 - $18,000=$162,000  Present 5% ~ $2,018,900 (20 year term)

© 2009 Bradley Arant Boult Cummings LLP IDB TIFs – Economic Impact Plans  The Economic Impact Area must: – be located in the municipality that created the Board; and also – must include either: an industrial park within the meaning of T.C.A. § ; or a project that is either owned by the Board or with respect to which the Board has loaned or will loan funds or has otherwise provided or will provide financial assistance

© 2009 Bradley Arant Boult Cummings LLP IDB TIFs – Economic Impact Plans  A Plan is required: – To specifically identify: The boundaries of the area subject to the Plan; and Identify the industrial park or project located within the Economic Impact Area subject to the Plan – To discuss the expected benefits to the municipality from the development of the Economic Impact Area – A Plan is not permitted to provide for an allocation of taxes to the Board for a period in excess of twenty (20) years unless Commissioner of Economic and Community Development and Comptroller have determined that it is in the Best Interest of the State.

© 2009 Bradley Arant Boult Cummings LLP IDB TIFs – Economic Impact Plans  Approval by IDB and Municipality – The Board must hold a public hearing after giving two weeks notice before submitting the Plan to the municipality. – The governing body of the municipality that created the Board must approve the Plan. – For taxes collected within the Economic Impact Area by the county or another municipality, the governing body of the county or other municipality must approve the Plan.

© 2009 Bradley Arant Boult Cummings LLP Comparison – TIFs and PILOTs  Title to Property – PILOT – Convey project to IDB – IDB TIF – Property owner owns project  Property Affected – PILOT – Covers project only – IDB TIF – Covers economic impact area

© 2009 Bradley Arant Boult Cummings LLP Comparison – TIFs and PILOTs  Required Approvals – PILOT – Municipal approval of PILOT program plus IDB approval (no county approval) – IDB TIF – Municipal, county and IDB approval of each economic impact plan – IDB PILOT and TIFs – Commissioner and Comptroller if term greater than 20 years – IDB TIF – Commissioner and Comptroller if use for costs other than Public Infrastructure

© 2009 Bradley Arant Boult Cummings LLP Overview of TIFs  J. Thomas Trent, Jr. (615)